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Internationalization: Strategic Management Concepts
As compared to a firm that only operates domestically (in one country), an international company expands to multiple markets and, therefore, faces unique costs and difficulties (David, 2013). Internationalization is a high-risk high-reward strategy for which multiple global and international considerations need to be made. Financially, an international company will likely have to deal with foreign currencies (Rizea, 2015). Because of the market volatility and political events, the exchange rate might change a lot, hurting a companys overseas revenues. For this reason, it is critical to develop a risk management plan that would mitigate the negative effects of foreign exchange. On top of that, an international company has to deal with different legal structures, many of which are dissimilar to the one on the domestic market and burdensome due to a vast amount of red tape. For this reason, it makes sense to hire international lawyers to make sure that business operations are legal and will not end in repercussions down the road.
Apart from legal and financial aspects, an international company needs to have a thoughtful marketing plan in place. When entering new markets, a company encounters foreign cultures that have their own sets of values. Some of these values may not be quite compatible with the original product, which means that there will need to be at least some adjustment in the form of localization. For example, if Chipotle wishes to to tap into the Indian market, it needs to be ready for customers preference for gathering in large groups, be it friends or family. The American company will have to rearrange the interior to accommodate more customers and make their stay as comfortable as possible.
References
David, F.R. (2013). Strategic management concepts: A competitive advantage approach. Pearson.
Rizea, R.D. (2015). Growth strategies of multinational companies. Petroleum-Gas University of Ploiesti Bulletin, Technical Series, 67(1), 59-66.
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